Friday, December 22, 2017

Fed lights the fuse

You can see here that as early as November 2007 the Fed created the initial credit contraction by quickly reducing the rate at which they were purchasing Treasury securities by $300B per some measure of time while keeping the total amount of system reserves constant:

Quickly tossed the task of dealing that amount over to the depository institutions to then have to finance. This started the whole thing till eventually they shut the whole system of finance down by adding reserve assets at the rate of approx $100B/month in September 2008.

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